According to VeriSign’s (VRSN - Free Report) latest “The Domain Name Industry Brief”, domain name registrations increased 0.5% sequentially to 332.4 million across top-level domains (TLDs) at the end of the fourth quarter. Domain name registrations increased 3.1 million or 0.9% year over year.
Country Code Top-Level Domains (“ccTLDs”) increased 2.4% year over year and 1% sequentially to 146.1 million in the December quarter. On a combined basis, .com and .net domain names increased 2.9% year over year to approximately 146.4 million in the fourth quarter.
Reportedly, new .com and .net registrations were 9 million compared with 8.8 million in the year-ago quarter, driven by strong demand in the United States. VeriSign reported that .com continued to maintain its position as the largest TLD, followed by .cn (China) and .tk (Tokelau).
New gTLD (“ngTLD”) registrations decreased 2.4% year over year to 20.6 million, which represent 6.2% of total domain name registrations. ngTLD declined 19.5% year over year.
Domain Registration Prospects
VeriSign is the exclusive registrar of the .com, .net and .name domains per its agreements with The Internet Corporation for Assigned Names and Numbers (ICANN).
Per the company’s agreement with ICANN, the annual fee for a .net domain name registration will be increased from $8.20 to $9.02 effective Feb. 1, 2018. However, the other terms of the agreement remain unchanged.
In 2017, the company also renewed the registry agreement for .net domain name till 2023. Moreover, in January, The United States Department of Justice also closed the investigation regarding Verisign's potential operation of the .web gTLD.
The company is currently engaged in the ICANN process regarding the further delegation of .web. Management noted that the guidance for 2018 does not take into consideration .web as it is still uncertain whether the operation will commence this year.
On the last conference call, VeriSign provided a raised guidance for its domain name base growth rate for 2018. The company now anticipates the same to grow between 2% and 3%. For the first quarter, VeriSign projects domain name base registration to increase in the range of 1.5 million to 2 million.
The company continues to benefit from strong demand in the United States as well as in international markets.
However, a significant headwind for VeriSign is soft growth in active domain name business for .com and .net TLDs.
Also, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to sales and marketing remain headwinds.
Zacks Rank & Stocks to Consider
VeriSign has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Micron Technology Inc. (MU - Free Report) , Lam Research Corporation (LRCX - Free Report) and Paycom Software Inc. (PAYC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Micron, Lam Research and Paycom Software is projected to be 10%, 14.9% and 25.8%, respectively.
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